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Swiss Govt Pushes For Adoption of Corporate Tax Reform Proposal

…..appeals to voters to allow it levy taxes

The Swiss Federal Council has said that corporate tax reform is now urgently needed, with the Government hopeful that the first reforms could enter into force in 2019.

A news report by Tax-New.com indicated that the Council met yesterday to discuss the progress made on tax proposal 17 (TP17), particularly the main findings of a consultation on TP17.

The Council was reported to have confirmed that participants in the consultation recognized the need for action, noting, however, that the consultation “showed that the proposal will remain demanding politically.”

Similarly, the Council also noted that for the measures to be agreed to by a substantial majority, and for Switzerland’s competitiveness to be maintained, a “high degree of willingness to compromise on the part of all parties concerned is indispensable.”

According to the news report, the Federal Department of Finance (FDF) is expected to continue talks with the cantons, communes, political parties, and other interested parties to facilitate the adoption of the tax reform overhaul proposal.

“The FDF will submit a dispatch on the proposals to Parliament this spring. The Federal Council hopes that the parliamentary debate on the measures will be concluded as early as the 2018 autumn session. If a referendum is not called, the first TP17 measures could enter into force at the beginning of 2019, with the remainder entering into force in 2020.

“Under TP17, the special arrangements for cantonal status companies will be abolished, and the cantons will be required to introduce patent box regimes, with the option of introducing additional tax deductions for research and development activities.

“Swiss operating companies of foreign companies will be entitled to a flat-rate tax credit, and the dividend taxation for “natural persons” will be increased to 70 percent at federal and cantonal level. Companies that relocate their headquarters to Switzerland will be able to benefit from additional amortization in the first “few” years of operations”, the report added

The Federal Council was also quoted as saying that the international trend toward lower corporate taxes has made the need for action still more urgent, adding that TP17 will be an effective way of ensuring that Switzerland remains a competitive location.

It would be recalled that in February 2017, the Government lost a referendum on its Corporate Tax Reform III package, which would have abolished a range of special tax arrangements for status companies, in an effort to meet evolving international tax standards on harmful tax competition.

The TP17 package was swiftly drawn up, and a consultation draft was released in September.

The Council said at the time that the current corporate tax system “no longer meets international requirements, which is having an increasingly negative impact on Switzerland as a location.”

Meanwhile, Reuters reported today that the Finance Minister, Ueli Maurer, appealed to voters to let the federal government keep levying taxes when they decide on a new public finance law in March.

According to the news report, under Switzerland’s system of direct democracy, voters on March 4 will have their say on extending the federal government’s right to levy federal income tax and value-added tax.

The direct federal tax and the sales tax together contributed about two-thirds of the Swiss central government’s budget, bringing in around 43.5 billion Swiss francs ($44.25 billion) in 2016.

However the right to levy the taxes is limited by the Swiss constitution, with current approval running only to the end of 2020.

Maurer told journalists that should voters reject the measure, the government would have to slash spending by more than 60 percent practically overnight or find new sources of revenue

“That would hardly be feasible and also not be in the interests of broad swathes of the population,” he said.

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